Information about the Car Scrapping Scheme

The 2009 budget announced an initiative by the government to get as many old cars off the roads and highways of the UK in what they termed a car scrapping scheme. In this plan, anyone who trades in an older model car and purchases a new one could receive a £2000 discount towards the purchase. This “bangers for cars” scheme, as it has been called, is an attempt to bolster the ailing automotive industry that has been hit with heavy losses in the recession.

This program is not one that will last forever. It is designed to run from May, 2009 to February, 2010 as long as there is money in the program, so if you do have plans to purchase a new vehicle in the future, now is the time to take action. Since there has been a certain amount of money put into this scheme, it will end when this money has been used up.

The basics of this program are that UK motorists can trade in their old car or van, as long as it is under 3.5 tons, for the discount. You will not receive a cash payment of £2000, but rather the manufacturer of the new car will discount the price by £1000 and the government will kick in another grant of £1000. Registration in the program is voluntary, but just about all of the major manufacturers have signed on offering this discount on top of others that they already have in place for car buyers.

In order to qualify for the scheme, your car must have been registered prior to July 31, 1999. The government has allocated £300 million to this program, which is estimated to be enough money to offer discounts on 300,000 cars. Vouchers for the discount have been available since May 18, 2009. You must bring your older car to a dealer along with the registration to prove the age of the car and that you are the registered owner. You must have an MOT.

You choose the new car you want to buy and the dealers will take care of the paperwork and make the arrangements to have the car scrapped. You can buy any make or model of car you wish because this program is not limited to only cars made in Britain.

The program does not apply to those who are buying cars for the first time or those who bought a car within the last ten years. The stipulation of the prior registration date strictly applies, so you can’t just buy an old beat up car today and swap it for a new one tomorrow.

There is more to this program than meets the eye. You will have to weigh the cost factor of how much a new car will depreciate over the years and the difference in what it will cost you to run this car versus the old car you already have. Michael Vassallo, assistant director of equity research at Brewin Dolphin Investment Banking, advises that most cars lose 30 % of their value in the first year alone and up to 65% of the value in the first three years. This level of depreciation varies according to the car you choose to buy.

Larger cars that use more petrol and are more costly to repair could bring even deeper discounts from the manufacturers than the smaller make cars. Since the cost of petrol is falling, there would be little benefit for buyers to invest in a car that takes diesel instead of gasoline.

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